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Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks

Mollah, Sabur ; Liljeblom, Eva LU and Mobarek, Asma (2021) In Journal of Corporate Finance 70.
Abstract

The extant literature suggests that complex firms can benefit from independent non-executive director (INED) quality. To address the issue of INED quality, we look at heterogeneity in the independent non-executive directors' (INEDs') attributes and explore whether this is related to risk-taking behaviour in large banks. We gather novel, hand-collected, director-level data for approximately 2400 independent non-executive directors (INEDs) of 185 global large banks from 35 countries for the period of 2004–2016, concluding that heterogeneity in INEDs' gender, financial expertise, and board tenure all influence risk-taking behaviour. Employing several identification strategies, we show that the cause seems to be heterogeneity in the INEDs'... (More)

The extant literature suggests that complex firms can benefit from independent non-executive director (INED) quality. To address the issue of INED quality, we look at heterogeneity in the independent non-executive directors' (INEDs') attributes and explore whether this is related to risk-taking behaviour in large banks. We gather novel, hand-collected, director-level data for approximately 2400 independent non-executive directors (INEDs) of 185 global large banks from 35 countries for the period of 2004–2016, concluding that heterogeneity in INEDs' gender, financial expertise, and board tenure all influence risk-taking behaviour. Employing several identification strategies, we show that the cause seems to be heterogeneity in the INEDs' attributes, as channelled through information asymmetry. We also find that heterogeneity in the INEDs' attributes significantly mitigates bank risk-taking in the post-2009 period. Our study contributes to the literature on both the benefits of INEDs and director heterogeneity.

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; and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Attributes heterogeneity, Independent non-executive director (INED), Large banks, Risk-taking
in
Journal of Corporate Finance
volume
70
article number
102074
publisher
Elsevier
external identifiers
  • scopus:85113699918
ISSN
0929-1199
DOI
10.1016/j.jcorpfin.2021.102074
language
English
LU publication?
yes
id
8500a7c9-1a01-42f1-a20c-01f7066ae85a
date added to LUP
2021-09-17 15:10:19
date last changed
2022-04-27 03:58:50
@article{8500a7c9-1a01-42f1-a20c-01f7066ae85a,
  abstract     = {{<p>The extant literature suggests that complex firms can benefit from independent non-executive director (INED) quality. To address the issue of INED quality, we look at heterogeneity in the independent non-executive directors' (INEDs') attributes and explore whether this is related to risk-taking behaviour in large banks. We gather novel, hand-collected, director-level data for approximately 2400 independent non-executive directors (INEDs) of 185 global large banks from 35 countries for the period of 2004–2016, concluding that heterogeneity in INEDs' gender, financial expertise, and board tenure all influence risk-taking behaviour. Employing several identification strategies, we show that the cause seems to be heterogeneity in the INEDs' attributes, as channelled through information asymmetry. We also find that heterogeneity in the INEDs' attributes significantly mitigates bank risk-taking in the post-2009 period. Our study contributes to the literature on both the benefits of INEDs and director heterogeneity.</p>}},
  author       = {{Mollah, Sabur and Liljeblom, Eva and Mobarek, Asma}},
  issn         = {{0929-1199}},
  keywords     = {{Attributes heterogeneity; Independent non-executive director (INED); Large banks; Risk-taking}},
  language     = {{eng}},
  publisher    = {{Elsevier}},
  series       = {{Journal of Corporate Finance}},
  title        = {{Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks}},
  url          = {{http://dx.doi.org/10.1016/j.jcorpfin.2021.102074}},
  doi          = {{10.1016/j.jcorpfin.2021.102074}},
  volume       = {{70}},
  year         = {{2021}},
}